Asked by RMerline Benjamin on Jun 29, 2024
Verified
As the interest rate rises a business firm would
A) become less inclined to invest.
B) become more inclined to invest.
C) continue to invest at the same level.
Interest Rate
The cost of borrowing money or the return on invested funds, typically expressed as a percentage of the principal amount per annum.
Inclined To Invest
Having a predisposition or a favorable attitude towards making investments, often with the expectation of achieving a financial return.
Business Firm
A company that produces goods and services for sale to individual consumers, other firms, or the government.
- Pinpoint the conditions fostering a higher propensity for investment.
- Understand the role of interest rates in investment decisions.
Verified Answer
TS
Tsahi SabagJul 02, 2024
Final Answer :
A
Explanation :
If interest rates rise, the cost of borrowing money increases, making it more expensive for businesses to finance investments. This makes businesses less inclined to invest and may result in them reducing their level of investment.
Learning Objectives
- Pinpoint the conditions fostering a higher propensity for investment.
- Understand the role of interest rates in investment decisions.